Photo credit: coop Your wage earnings and other income can impact your Social Security benefit in several ways. These earnings can increase the amount of your Social Security benefit that is taxable. In some cases, continued earnings can increase your future benefit rate as well. Wage earnings while collecting benefits can also reduce your current benefit if you’re over the annual earnings limits and you’re under Full Retirement Age. Continued wage earnings at or above the substantial earnings limits can also result in a smaller WEP reduction, or perhaps eliminate WEP altogether. Taxation De ..read more

Photo credit: jb If you have multiple options of various different kinds of accounts to choose from, such as an IRA, a Roth IRA, a qualified retirement plan (such as a 401(k) plan) also known as a QRP, and perhaps an inherited IRA; you may be asking yourself: which one should I withdraw from first? If you’re under age 59½, some of the options include considerable penalties – withdrawals from either the traditional IRA or the QRP will incur a 10% penalty for early withdrawal unless you meet one of the exceptions. So this leaves the Roth IRA or the inherited IRA. Each of these can be taxable t ..read more

If you’re trying to find information from your prior years’ tax returns and you don’t have the old forms (who has the space to keep all that!?), you have a few options available to you. Generally speaking, your tax preparer should have old records for you – as long as it wasn’t too long ago. Sometimes this is a challenge for the preparer, as changes to software and office systems can result in difficult to retrieve records, although within reason your preparer should be able to get the forms for you. If your preparer either doesn’t have the information or you’re reluctant to approach the prepa ..read more

Photo credit: jb In general, when you withdraw funds from an IRA prior to age 59½, your withdrawal is subject to both income tax and the 10% early withdrawal penalty. The 10% penalty is waived if your withdrawal is for one of the exception categories, including first-time home purchase, certain medical expenses, and the like. For a complete list of the exceptions, see the article I had previously written which provides links to the various exceptions to the 10% penalty. One of the exceptions to the penalty is a withdrawal for a Roth Conversion. You still must pay ordinary income tax on the c ..read more

Photo credit: diedoe I’m compelled to provide an additional update to the posts I’ve provided in the past in the article Running Afoul of One Rollover Per Year Rule and its follow-up More on the One-Rollover-Per-Year Rule. This is primarily to provide clarity to a portion of this rule that I personally was unclear on when the articles were originally written. The rule is that you are restricted to one IRA rollover in a 12-month period. So let’s define a few things for the purpose of this discussion: Rollover – this is when you move money from one IRA to another, first taking possession of th ..read more

Photo credit: jb As we approach the extended income tax filing deadline, folks all over the country are in a mad rush to fill out returns and complete the filing process. Software for return preparation has helped to resolve a lot of the issues and errors that occur in filing your returns, but still errors occur – there’s no way to completely fool-proof the process. Below is a list that was published by the IRS, entitled Tax-Time Errors Filers Should Avoid: Tax-Time Errors Filers Should Avoid Mistakes on tax returns mean they take longer to process, which in turn may cause your refund to arr ..read more

I get a lot of questions about when to take Social Security benefits most efficiently, and when to begin Spousal Benefits. And unfortunately, I am often at a loss for giving a specific answer to the individual, because I just don’t have enough information. Social Security planning has very many factors that must be considered – for example: It’s important to consider earnings from your job if you’re filing early and continuing to work (see Social Security Earnings Tests for more information), as this can impact the amount of benefits you actually receive. Your health status and longevity are ..read more

Photo credit: jb This is one of those subjects that can be a bit confusing – and it’s based on the rules that apply to the different kinds of plans, as well as different kinds of beneficiaries. You are aware that you’re required* to begin taking Required Minimum Distributions (RMDs) once you reach age 70½ – no wait, 72 – whoops now it’s 73*** – but did you know that specifically which account you take the RMD from has some flexibility? Well – not only flexibility, also some rigidity… There is a Difference Between IRA and 401(k) Starting off, we need to understand that, in the IRS’s eyes, the ..read more

Since the housing market downturn, the national pastime of “property flipping” has fallen in popularity – heck, I haven’t seen a TV show on property flipping in ages. But the activity of buying a fixer-upper, applying a little sweat equity, and then reselling for a profit has been going on ever since Gog first rehabbed and sold that condo-cave with a view. If you (or someone you know) are involved in flipping, there have been tax cases that you may want to pay particular attention to. Most of the time, the question of how the sales receipts are classified was addressed, and how the Tax Court r ..read more

I was recently re-reading an older book, The Money Game, by “Adam Smith”, and I came across a very poignant passage that I thought I should share. This book was written in 1967, and it is a very interesting take on money and how we view it. The passage relates to how we perceive investments in general, as well as the importance of having a goal for your investments and saving activities. Keep in mind that this passage was written more than 55 years ago, so some references will be woefully out of date, but the message is still clear and valid. Let me know if it gives you inspiration – I thought ..read more